UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Progress Financial Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
________________________________________________________________________________
[Progress Letterhead]
March 25, 2003
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders
of Progress Financial Corporation. The meeting will be held at the Plymouth
Country Club located at Plymouth and Belvoir Roads, Norristown, Pennsylvania on
Tuesday, April 22, 2003 at 9:00 a.m., Eastern Time. The matters to be considered
by stockholders at the annual meeting are described in the accompanying
materials.
It is very important that you be represented at the annual meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign and date your proxy card today and
return it in the envelope provided, even if you plan to attend the annual
meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are unable to attend.
We appreciate your support and interest in Progress Financial
Corporation.
Sincerely,
/s/ W. Kirk Wycoff
-----------------------
W. Kirk Wycoff
Chairman, President and
Chief Executive Officer
PROGRESS FINANCIAL CORPORATION
4 Sentry Parkway, Suite 200
P.O. Box 3036
Blue Bell, Pennsylvania 19422-0764
(610) 825-8800
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 22, 2003
-----------------------
NOTICE IS HEREBY GIVEN that the annual meeting of Stockholders of
Progress Financial Corporation ("Progress" or the "Company") will be held at the
Plymouth Country Club located at Plymouth and Belvoir Roads, Norristown,
Pennsylvania on Tuesday, April 22, 2003 at 9:00 a.m., Eastern Time, for the
following purposes, all of which are more completely set forth in the
accompanying proxy statement:
(1) To elect three directors for a three-year term and one director
for a one-year term and, in each case, until their successors are
elected and qualified;
(2) To amend the Company's 2000 Incentive Stock Option Plan to
authorize the issuance of an additional 100,000 shares of common
stock pursuant to the plan;
(3) To ratify the appointment by the board of directors of
PricewaterhouseCoopers LLP as the Company's independent
accountants for the year ending December 31, 2003; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof. Management is not aware of any
other such business.
The board of directors has fixed March 7, 2003 as the record date for
the determination of stockholders entitled to notice of and to vote at the
annual meeting and at any adjournment thereof. Only those stockholders of record
as of the close of business on that date will be entitled to vote at the annual
meeting or at any such adjournment.
A copy of the Company's annual report to stockholders for 2002 is
enclosed. The annual report is not to be regarded as proxy solicitation
material.
By Order of the Board of Directors
/s/ Eric J. Morgan
---------------------
Eric J. Morgan
Corporate Secretary
Blue Bell, Pennsylvania
March 25, 2003
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YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. HOWEVER, IF YOU ARE A
STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED
ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO VOTE IN PERSON AT
THE ANNUAL MEETING.
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PROXY STATEMENT
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PROGRESS FINANCIAL CORPORATION
4 Sentry Parkway, Suite 200
P.O. Box 3036
Blue Bell, Pennsylvania 19422-0764
(610) 825-8800
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 2003
This proxy statement is furnished to holders of common stock, $1.00 par
value per share of Progress Financial Corporation ("Progress" or the "Company"),
a Delaware corporation, in connection with the solicitation by and on behalf of
the Board of Directors of the Company to be used at the annual meeting of
stockholders to be held at the Plymouth Country Club located at Plymouth and
Belvoir Roads, Norristown, Pennsylvania, on Tuesday, April 22, 2003 at 9:00
a.m., Eastern Time, and at any adjournment thereof. This proxy statement is
first being mailed to stockholders on or about March 25, 2003.
At the annual meeting, stockholders will be asked to elect three
directors to serve for a three-year term expiring in 2006 and one director to
serve for a one-year term expiring in 2004; to amend the Company's 2000
Incentive Stock Option Plan ("Incentive Plan") to authorize the issuance of an
additional 100,000 shares of common stock pursuant to the plan, to ratify the
appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants for the year ending December 31, 2003; and to transact such other
business as may properly come before the meeting and all adjournments thereof.
The proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted "FOR" the nominees for director described herein,
"FOR" the amendment to the Incentive Plan, "FOR" the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants for the year
ending December 31, 2003, and upon the transaction of such other business as may
properly come before the meeting, in accordance with the best judgment of the
persons appointed as proxies. Any stockholder giving a proxy has the power to
revoke it at any time before it is exercised by (i) filing with the Secretary of
the Company written notice thereof (Attention: Eric J. Morgan, Corporate
Secretary, Progress Financial Corporation, 4 Sentry Parkway, Suite 200, P.O. Box
3036, Blue Bell, Pennsylvania 19422-0764); (ii) submitting a duly-executed proxy
bearing a later date; or (iii) appearing at the annual meeting and giving the
Secretary notice of his or her intention to vote in person. However, if you plan
to attend the meeting and vote in person and your shares are held in the name of
a broker or other nominee, please bring with you a proxy or letter from the
broker or nominee to confirm your ownership of the shares. Proxies solicited
hereby may be exercised only at the annual meeting and any adjournment thereof
and will not be used for any other meeting.
VOTING
Only stockholders of record at the close of business on March 7, 2003
will be entitled to vote at the annual meeting. On the record date, there were
6,612,321 shares of common stock issued and outstanding, held by approximately
1,800 holders of record, and the Company had no other class of equity securities
outstanding. Each share of common stock is entitled to one vote at the annual
meeting on all matters properly presented at the meeting.
The presence in person or by proxy of at least a majority of the
outstanding shares of common stock entitled to vote is necessary to constitute a
quorum at the annual meeting. Directors are elected by a plurality of the votes
cast at the annual meeting. The persons receiving the greatest number of votes
of the common stock in each class, up to the number of directors to be elected
in such class, will be elected as directors. The affirmative vote of the holders
of a majority of the total votes cast at the annual meeting is required to
ratify the amendment to the Incentive Plan and the appointment of the Company's
independent auditors.
Abstentions will be counted for purposes of determining the presence of
a quorum at the annual meeting. Because of the required votes, abstentions will
not be counted as votes cast with respect to the proposals to elect directors,
to amend the Incentive Plan and to ratify the appointment of the Company's
independent auditors and, thus, will have no effect on the voting of these
proposals. Under rules of the New York Stock Exchange applicable to
broker-dealers, the election of directors and the proposals to amend the
Incentive Plan and to ratify the auditors are considered "discretionary" items
upon which brokerage firms may vote in their discretion on behalf of their
clients if such clients have not furnished voting instructions. Thus, there will
be no "broker non-votes" at the meeting. However, the New York Stock Exchange
has proposed changes to its rules regarding brokers' discretionary voting
authority, which may limit your broker's ability to vote on the proposal to
amend the Incentive Plan unless you provide your broker with voting
instructions. If these proposed changes to the New York Stock Exchange rules
become effective prior to the annual meeting, your broker may not be able to
vote your shares on this proposal without receiving instructions from you.
INFORMATION WITH RESPECT TO NOMINEES FOR
DIRECTOR AND DIRECTORS WHOSE TERMS CONTINUE
Election of Directors
The certificate of Incorporation and bylaws of the Company provide that
the board of directors of the Company shall consist of no fewer than seven nor
more than 21 members, the exact number to be fixed from time to time by
resolution of the board of directors (which is currently set at 11 members). The
board of directors shall be divided into three classes as nearly equal in number
as possible, and that the members of each class are to be elected for a term of
three years and until their successors are elected and qualified. One class of
directors is to be elected annually, and stockholders of the Company are not
permitted to cumulate their votes for the election of directors.
No nominee for director is related to any other director or executive
officer of the Company by blood, marriage or adoption, and there was no
arrangement or understanding pursuant to which any of the nominees for director
was selected as a nominee. All nominees currently serve as directors of the
Company.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the four nominees for director
listed below. If any person named as nominee should be unable or unwilling to
stand for election at the time of the annual meeting, the proxies will vote for
any replacement nominee or nominees recommended by the board of directors. At
this time, the board of directors knows of no reason why any of the nominees
listed below may not be able to serve as a director if elected.
The following tables present information concerning each nominee for
director and each director whose term continues, including the principal
occupation of such person during at least the past five years, their tenure as a
director of the Company and the number and percent of common stock beneficially
owned by such persons as of the record date.
2
Nominees for Director for a Three-Year Term Expiring in 2006
Common Stock
Beneficially Owned
as of
March 7, 2003(1)
Principal Occupation During Director -------------------
Name Age the Past Five Years Since No. %
- ------------------- ----- -------------------------------------------- ---------- -------- -------
A. John May, III 47 Partner in the law firm Pepper, Hamilton 1993 23,855(2) --%
LLP in Berwyn, Pennsylvania since 1981.
Charles J. Tornetta 72 President of Tornetta Realty Corporation, 1991 92,174(3) 1.4
a real estate broker in Norristown,
Pennsylvania. Also, President of
Commonwealth Insurance Agency, Inc.
W. Kirk Wycoff 44 Chairman, President and Chief Executive 1991 470,401(4) 6.9
Officer of the Company and the Bank.
Nominees for Director for a One-Year Term Expiring in 2004
Common Stock
Beneficially Owned
as of
March 7, 2003(1)
Principal Occupation During Director -------------------
Name Age the Past Five Years Since No. %
- ------------------- ----- -------------------------------------------- ---------- -------- -------
Frank A. Farnesi 55 Managing Director of Augustine Associates 2003 16,335(5) --
LLC, a private holding company located in The
Villages, Florida. From 1969 to June 2001,
partner with the accounting firm of KPMG LLP,
serving most recently as partner in charge of
the Pennsylvania tax practice.
The Board of Directors recommends a vote FOR election of the nominees for director.
3
Members of the Board of Directors Continuing in Office
Directors With Terms Expiring in 2004
Common Stock
Beneficially Owned
as of
March 7, 2003(1)
Principal Occupation During Director -------------------
Name Age the Past Five Years Since No. %
- ------------------- ----- -------------------------------------------- ---------- -------- -------
William O. Daggett, Jr. 62 President and owner of Kistler-Tiffany 1990 117,359(6) 1.8%
Benefits, a firm engaged in the sale, service
and administration of employee benefits in
Wayne, Pennsylvania since 1984. Also,
Chairman of the Board of North American
Benefits Company since 1992, President of
Benefit Designs, Inc., and Vice President of
Group Brokerage Associates, Inc., Group
Marketing Services, Inc. and Quality RX
Services, Inc.
Joseph R. Klinger 60 President, Asset Based Finance Division of 1992 29,669(7) --
Mercantile Capital LP since March 2002.
Previously, Executive Vice President of the
Bank and Chief Executive Officer of Progress
Business Finance from January 2000 to
February 2002. From 1991 to 1999, principal
of KMR Management, Inc., a management
consulting company in Glenside, Pennsylvania.
William L. Mueller 51 Partner with the law firm of Ballard, Spahr, 1990 127,929(8) 1.9
Andrews & Ingersoll, LLP since January 2002.
Previously, partner with the law firm Brandt,
Haughey, Penberthy, Lewis & Hyland in
Moorestown, New Jersey since December 1996.
Former attorney with Clark, Ladner, Fortenbaugh
and Young in Cherry Hill, New Jersey from
November 1987 until November 1996.
4
Directors With Terms Expiring in 2005
Common Stock
Beneficially Owned
as of
March 7, 2003(1)
Principal Occupation During Director -------------------
Name Age the Past Five Years Since No. %
- ------------------- ----- -------------------------------------------- ---------- -------- -------
G. Daniel Jones 51 Managing Director of CBIZ Business 1999 33,757(9) --%
Solutions, Inc., a professional corporation
of certified public accountants, located in
Plymouth Meeting, Pennsylvania, since 1982.
Paul M. LaNoce 43 President of DAR Industrial Products, Inc., 1991 52,265(10) --
an industrial manufacturer in W. Conshohocken,
Pennsylvania since 1981.
Kevin J. Silverang 47 Attorney/Managing Shareholder with the law 1999 31,716(11) --
firm of Buchanan Ingersoll in Philadelphia,
Pennsylvania since December 1997. Former
attorney and founding partner of the law
firm, Kaufman, Coren, Ress, Weidman &
Silverang, P.C. in Philadelphia, Pennsylvania
from May 1995 to November 1997. Previously,
he was an attorney and founding partner of
the law firm of Huggler & Silverang in
Philadelphia, Pennsylvania.
Stephen T. Zarrilli 41 Chief Financial Officer of Fiberlink 2000 12,530(12) --
Communications Corp. since August 2001.
Previously, Chief Executive Officer of
Concelleva Software, Inc., Malvern,
Pennsylvania, from October 2000 to August 2001,
Chief Financial Officer of U.S. Interactive,
Inc., King of Prussia, Pennsylvania from 1995
to January 1999 and Chief Executive Officer
from January 1999 to September 2000 (U.S.
Interactive, Inc. filed for protection under
Chapter 11, Reorganization of the Federal
bankruptcy laws in January 2001).
5
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(1) Unless otherwise indicated, the number of shares owned is less than 1% of
the issued and outstanding common stock of the Company.
(2) Includes 8,681 shares held jointly by Mr. May with or for the benefit of
certain family members and 15,174 shares subject to stock options which
are exercisable within 60 days of the record date. Does not include 2,424
shares held by Mr. May for the benefit of his children for which Mr. May
disclaims beneficial ownership.
(3) Includes 6,076 shares held jointly by Mr. Tornetta with or for the benefit
of certain family members and 19,659 shares subject to stock options which
are exercisable within 60 days of the record date.
(4) Includes 46,451 shares held jointly by Mr. Wycoff with or for the benefit
of certain family members, 2,863 shares held in the Company's Employee
Stock Ownership Plan ("ESOP") and 230,754 shares subject to stock options
which are exercisable within 60 days of the record date.
(5) Includes 8,900 shares held jointly with Mr. Farnesi's spouse and 3,425
shares subject to stock options which are exercisable within 60 days of
the record date.
(6) Includes 65,611 shares owned by companies of which Mr. Daggett is a
director, officer and 10% stockholder, 6,615 shares owned by Mr. Daggett's
wife and 19,659 shares subject to stock options which are exercisable
within 60 days of the voting record date.
(7) Includes 23,900 shares owned jointly with Mr. Klinger's wife and 4,769
shares subject to stock options which are exercisable within 60 days of
the record date.
(8) Includes 31,482 shares held jointly by Mr. Mueller with or for the benefit
of certain family members and 18,502 shares subject to stock options which
are exercisable within 60 days of the record date.
(9) Includes 20,921 shares held through an IRA account or held jointly with or
for the benefit of certain family members and 12,762 shares subject to
stock options which are exercisable within 60 days of the record date.
(10) Includes 20,237 shares subject to stock options which are exercisable
within 60 days of the record date.
(11) Includes 18,954 shares held jointly by Mr. Silverang with or for the
benefit of certain family members and 12,762 shares subject to stock
options which are exercisable within 60 days of the record date.
(12) Includes 11,409 shares subject to stock options which are exercisable
within 60 days of the record date.
Stockholder Nominations
Nominations for members of the board of directors of the Company are
made by the board of directors or by any stockholder entitled to vote at the
annual meeting. Section 8.4(d) of the Company's certificate of incorporation
sets forth the procedures which stockholders must follow in order to make
nominations for election to the board of directors. In general, such nominations
must be submitted in writing to the Company at least 30 days prior to the date
of the annual meeting. The Company is not required to include such nominations
in its proxy statement. If any stockholder properly makes such a nomination, the
ballots provided for use by stockholders at the annual meeting will bear the
name of such nominee or nominees.
The Board of Directors and Its Committees
The board of directors of the Company held a total of five meetings
during the year ended December 31, 2002. No incumbent director attended fewer
than 75% of the aggregate total number of meetings of the board of directors
held during the year ended December 31, 2002 and the total number of meetings
held by all committees on which he served during such year.
The board of directors of the Company has established several
committees, including an Executive Committee and an Audit Committee.
The Executive Committee of the Company has been established to make
decisions on acquisitions, investments, and other board actions between board
meetings. This committee also acts as the Nominating Committee. For 2002, the
following board members served on the Executive Committee which met six times in
2002: Kevin J. Silverang, Paul M. LaNoce, William O. Daggett, Jr., Charles J.
Tornetta and W. Kirk Wycoff.
6
The Audit Committee of the Company recommends to the board independent
auditors to perform audit and non-audit services, reviews the scope and results
of such services, reviews with management and the independent auditors the
systems of internal control and audit, assures adherence in accounting and
financial reporting to generally accepted accounting principles, and performs
such other duties deemed appropriate by the board of directors. The Audit
Committee met five times in 2002. The following board members served on the
Audit Committee in 2002: William O. Daggett, Jr. (Co-Chairman), G. Daniel Jones
(Co-Chairman), John E. F. Corson, Paul LaNoce and Stephen T. Zarrilli. The
members of the Audit Committee are independent as defined in Rule 4200 (a)(14)
of the listing standards of the Nasdaq Stock Market.
Report of the Audit Committee
The Audit Committee has reviewed and discussed the audited financial
statements with management. The Audit Committee has discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61 "Communication with Audit Committees." The Audit
Committee has received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1,
and has discussed with the independent accountant, the independent accountant's
independence. Based on the review and discussions referred to above in this
report, the Audit Committee recommended to the board of directors that the
audited financial statements be included in the Company's annual report on Form
10-K for the year ended December 31, 2002 for filing with the Securities and
Exchange Commission.
William O. Daggett, Jr.
G. Daniel Jones
John E.F. Corson
Paul M. LaNoce
Stephen T. Zarrilli
Executive Officers Who Are Not Directors
The following table sets forth certain information with respect to the
executive officers of the Company who are not directors.
Name Age Positions(s)
- ---------------- ------ ----------------------------------------------
Eric J. Morgan 50 Senior Vice President, Chief Credit and Risk
Officer and Secretary
Michael B. High 54 Chief Operating Officer and Chief Financial
Officer
Set forth below is a brief description of the background of each
executive officer of the Company who is not a director for at least the last
five years.
Eric J. Morgan. Mr. Morgan has served as Senior Vice President and
Chief Credit and Risk Officer of the Company and the Bank since June 1993. In
addition, he has served as Secretary of the Company and the Bank since June
1995. Prior to joining the Company in 1993, Mr. Morgan served as President of
Crusader Savings Bank in Rosemont, Pennsylvania.
Michael B. High. Mr. High has served as Chief Operating Officer since
November 2001 and as Executive Vice President and Chief Financial Officer of the
Company and the Bank since October 1998. Prior to joining the Company in 1998,
Mr. High served as Senior Vice President of Accounting and Reporting at
CoreStates Financial Corporation, Philadelphia, Pennsylvania, following the
merger in 1996 of CoreStates and Meridian Bancorp, Reading, Pennsylvania, where
he was Senior Vice President of Finance since 1993. Previously, Mr. High served
as Senior Vice President and Chief Financial Officer of Meritor Savings Bank.
7
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes, as of the record date, certain
information as to the common stock beneficially owned by: (i) the only persons
or entities, including any "group" as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934 who or which was known to the Company to be
the beneficial owner of more than 5% of the issued and outstanding common stock,
other than members of the board of directors as disclosed under "Information
with Respect to Nominees for Director and Directors Whose Terms Continue," (ii)
certain named executive officers of the Company and (iii) all directors and
executive officers of the Company as a group.
Common Stock
Beneficially Owned
as of
March 7, 2003(1)
Name and Address of -------------------
Beneficial Owner No. %
-------------------------------------- -------- -------
Emerald Advisors, Inc. 401,885(2) 6.1%
1857 William Penn Way
Lancaster, Pennsylvania 17601
Other named executive officers:
Michael B. High 36,001(3) --
Eric J. Morgan 34,135(4) --
All directors and executive officers 1,110,519(5) 15.7%
of the Company as a group (14 persons)
- -----------------
(1) Unless otherwise indicated, the number of shares owned is less than 1% of
the issued and outstanding common stock.
(2) Emerald Advisors possesses sole voting power over 248,564 shares and sole
dispositive power over 401,885 shares.
(3) Includes 18 shares held in the Company's Employee Stock Purchase Plan, 681
shares held in the ESOP and 25,544 shares subject to stock options which
are exercisable within 60 days of the record date.
(4) Includes 1,803 shares held in the ESOP, 3,603 shares held in the Purchase
Plan and 27,293 shares subject to stock options exercisable within 60 days
of the record date.
(5) Includes, on behalf of all executive officers and directors as a group,
5,347 shares held in the ESOP, 3,621 shares held in the Purchase Plan and
440,451 shares subject to stock options which are exercisable within 60
days of the record date.
8
EXECUTIVE COMPENSATION
Summary
The following table sets forth a summary of certain information
concerning the compensation awarded to or paid by the Company for services
rendered in all capacities during the last three fiscal years to the chief
executive officer and the following named executive officers of the Company
whose compensation exceeded $100,000 in 2002.
SUMMARY COMPENSATION TABLE
====================================================================================================================================
Long Term
Annual Compensation Compensation
- -------------------------------------------------------------------------------------------------------------
Awards
Other ------------- All
Name and Annual Other
Principal Position Year Salary(1) Bonus(3) Compensation(4) Options # Compensation(5)
- ------------------------------------------------------------------------------------------------------------------------------------
W. Kirk Wycoff 2002 $500,000(2) $175,000 $ -- -- $ 9,111
Chairman, President and 2001 446,153 167,500 -- 35,000 55,919
Chief Executive Officer 2000 406,250 131,250 -- 42,000 284,367
Eric J. Morgan 2002 115,076 12,331 -- 2,500 5,591
Senior Vice President and 2001 112,538 6,600 -- 2,000 4,019
Chief Credit Officer 2000 108,773 11,000 -- 2,625 5,694
Michael B. High 2002 200,000 42,000 -- 6,000 9,111
Chief Operating Officer and 2001 194,231 24,000 -- 7,500 5,683
Chief Financial Officer 2000 152,885 30,000 -- 5,250 5,954
====================================================================================================================================
(1) Includes amounts deferred pursuant to the Company's 401(k) Profit
Sharing Plan, which generally allows employees to defer up to 12% of
their compensation, subject to applicable limitations set forth in the
Internal Revenue Code.
(2) Includes for Mr. Wycoff in 2002, $50,000 of compensation for serving on
the investment committee of NewSpring Ventures, L.P., which was
included in "All Other Compensation" in previous years.
(3) Bonuses are generally paid based on the attainment of performance
objectives for the prior year.
(4) Does not include amounts attributable to miscellaneous benefits
received by executive officers, including the use of Company-owned
automobiles. In the opinion of management of the Company, the costs to
the Company of providing such benefits to any individual executive
officer during the year ended December 31, 2002 did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus
reported for the individual.
(5) In 2002, consists of employer contributions made by the Company
pursuant to the Company's 401(k) Plan of $5,500, $3,394 and $5,500,
respectively, for Messrs. Wycoff, Morgan and High and allocations
pursuant to the ESOP of $3,611, $2,197 and $3,611, respectively.
Compensation of Directors
Director's Fees. The board of directors of the Bank meets monthly and
the Board of the Company meets at least quarterly. In 2002, non-employee
directors of both the Company and the Bank received an annual retainer of $6,000
of which $3,000 was paid in cash and $3,000 was paid in stock options based upon
the Black Scholes valuation method (739 shares at an exercise price of $7.47 per
share). Each non-officer director received a fee of $500 for each Board meeting
attended, a fee of $500 for each Executive Committee meeting attended, $600 for
each Audit Committee meeting attended and $400 for each Loan Committee meeting
attended.
Directors' Stock Option Plan. The Company maintains the Amended and
Restated 1993 Directors' Stock Option Plan (the "Directors' Plan") which
provides for the grant of compensatory stock options to non-employee directors
9
of the Company and the Bank. Pursuant to the Directors" Plan, in June 1993 each
non-employee director of the Company or the Bank was granted a compensatory
stock option to purchase 6,076 shares of common stock, at an exercise price of
$2.88 per share. In addition, options to purchase 302 shares were granted to
each non-employee director for each year from 1993 to 1996, options to purchase
606 shares were granted in 1997 and 1998 and options to purchase 607 shares were
granted in each year from 1999 through 2002 and will be granted to each
non-employee director each year until December 31, 2007. The exercise price is
equal to the fair market value of a share of common stock on the date of grant.
Options granted pursuant to the Directors' Plan are immediately vested and
exercisable. In 2002, non-employee directors received options to purchase 607
shares of common stock at $11.61 per share under the Directors' Plan. (Share
amounts have been adjusted for stock dividends paid on the common stock.)
Compliance with Section 16 (a) of the Securities Exchange Act
Pursuant to Item 405 of Regulation S-K, the Company is required to
disclose (based solely upon a review of forms furnished to the Company pursuant
to Rule 16a-3(e) during its most recent fiscal year) each person who, at any
time during the fiscal year, was a director, executive officer or beneficial
owner of more than ten percent of the Company's common stock that failed to file
on a timely basis, as disclosed in the above forms, reports required by Section
16(a) of the Exchange Act during the most recent fiscal year or prior fiscal
years.
Based upon its review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company, the Company is not aware of any director, officer,
beneficial owner of more than 10 percent of the Company's common stock or any
other person subject to Section 16 of the Exchange Act who has failed to file
any such form on a timely basis during 2002.
Stock Options
The following table sets forth certain information concerning
individual grants of stock options pursuant to the Company's stock option plans
to the named executive officers during the year ended December 31, 2002.
====================================================================================================================
Potential Realizable Value at
Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(4)
- --------------------------------------------------------------------------------------------------------------------
% of Total
Options
Options Granted to Exercise Expiration
Name Granted(1) Employees(2) Price(3) Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------
W. Kirk Wycoff -- --% $ -- -- $ -- --
- --------------------------------------------------------------------------------------------------------------------
Eric J. Morgan 2,500 3.6 8.05 2/15/2012 12,657 32,074
- --------------------------------------------------------------------------------------------------------------------
Michael B. High 6,000 8.7 8.05 2/15/2012 30,376 76,978
====================================================================================================================
(1) The options vest and become exercisable over three years, one-third per
year commencing one year from the date of grant.
(2) Percentage of options to purchase common stock granted to all employees
during 2002.
(3) The exercise price was based on the market price of the common stock on
the date of grant.
(4) Assumes compounded rates of return for the remaining life of the options
and future stock prices of $13.11 and $20.88 at compounded rates of return
of 5% and 10%, respectively.
10
The following table sets forth certain information concerning exercises
of stock options by the named executive officers during the year ended December
31, 2002 and options held at December 31, 2002.
Aggregated Option Exercise in Last Fiscal Year
and Year End Option Values
====================================================================================================================
Number of Value of
Shares Unexercised Unexercised
Acquired on Value Options at Year End Options at Year End(1)
Name Exercise Realized ----------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
W. Kirk Wycoff 35,000 $163,506 255,344 37,044 $1,370,984 $ 89,166
- --------------------------------------------------------------------------------------------------------------------
Eric J. Morgan -- -- 24,916 4,687 152,571 13,995
- --------------------------------------------------------------------------------------------------------------------
Michael B. High -- -- 19,296 15,991 9,843 40,467
====================================================================================================================
(1) Based on a per share market price of $11.61 at December 31, 2002.
The following table sets forth certain information for all equity
compensation plans and individual compensation arrangements (whether with
employees or non-employees, such as directors) in effect as of December 31,
2002.
Equity Compensation Plan Information
============================================================================================================================
Number of securities remaining
Number of securities to be Weighted-average available for future issuance
issued upon exercise of exercise price of under equity compensation plans
outstanding options, outstanding options, (excluding securities reflected
Plan Category warrants and rights warrants and rights in the first column)
- ----------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 761,451(1) $7.9861 286,426(2)
approved by security holders
- ----------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not -- -- 40,931(3)
approved by security holders
- ----------------------------------------------------------------------------------------------------------------------------
Total 761,451 $7.9861 327,357
============================================================================================================================
(1) Excludes purchase rights accruing under the 1996 Employee Stock Purchase
Plan, which has a stockholder approved reserve of 300,000 shares of common
stock. Under the 1996 Employee Stock Purchase Plan, each eligible employee
may purchase shares of common stock at semi-annual intervals each year at a
purchase price determined by the committee of the board of directors which
administers the plan, which shall not be less than 95% of the lesser of (i)
the fair market value of a share of common stock on the first business day
of the applicable semi-annual offering period or (ii) the fair market value
of a share of common stock on the last business day of such offering
period. In no event may the amount of common stock purchased by a
participant in the 1996 Employee Stock Purchase Plan in a calendar year
exceed $25,000, measured as of the time an option under the plan is
granted.
(2) Includes shares available for future issuance under the 1996 Employee Stock
Purchase Plan. As of December 31, 2002, an aggregate of 187,255 shares of
common stock were available for issuance under this plan.
(3) Represent shares of common stock which may be granted under the Restricted
Stock Award Plan, which was adopted in 1998 in connection with the
acquisition of Progress Financial Resources, Inc. ("PFR") and provides for
the grant of restricted common stock to employees of PFR.
11
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the board of directors determines the
compensation of executive officers of the Company. During 2002, the members of
the Committee were Messrs. LaNoce, Daggett, Silverang, Tornetta and Mueller. No
member of the committee is a current or former officer or employee of the
Company or the Bank. The committee generally meets in the first calendar quarter
of each year to review the compensation paid for the prior year, the Company's
and the individual's performance for the prior year, and to set compensation
levels for the coming year. The report of the committee with respect to
compensation for 2002 for the Chief Executive Officer and all other executive
officers is set forth below.
Report of the Compensation Committee
The Compensation Committee establishes the policy for compensation of
executive officers of the Company. The Committee also serves as the Stock
Benefits Plan Committee, which makes awards under the Company's stock benefit
plans and recommends to the Board of Directors changes or additions to the
Company's stock benefit programs. The goals of the Committee are to assist the
Company in attracting and retaining qualified management, motivating executives
to achieve performance goals, rewarding management for outstanding performance
and ensuring that the financial interests of the Company's management and
stockholders are satisfied. The Committee believes that this is best
accomplished through an appropriate mix of competitive base salaries, bonuses
and stock incentives.
The Committee considered the following factors among others in
determining base salary levels for executive officers in 2002, including the
Chief Executive Officer:
o the performance of the executive officer during 2001;
o the Company's reduced earnings in 2001, including its decline in
earnings per share;
o the below budget performance of the Company and the Bank in 2001;
and
o the compensation paid by bank holding companies and commercial
banks of comparable size.
The Committee did not assign particular weights to any of the above
factors, but it did consider that the Company and the Bank did not meet their
earnings goals for 2001. The Committee also reviewed the 2001 Commercial Bank
Compensation Survey from SNL Securities for banks of similar size.
The Committee discussed whether Mr. Wycoff's base salary should remain
at the 75th percentile for comparably sized banks. Based on the Company's
performance in 2001, the Committee determined that it was appropriate for Mr.
Wycoff's base salary to remain above the median of the peer group but concluded
that no increase in base salary was warranted. The salary shown for Mr. Wycoff
in the Summary Compensation Table is higher in 2002 than in 2001 primarily
because the compensation paid to Mr. Wycoff for serving on the Investment
Committee of NewSpring Ventures, L.P., which was managed by Progress Capital
Management, Inc. ("PCM"), was included in Mr. Wycoff's base salary beginning in
2002. In 2001, Mr. Wycoff received $50,000 from PCM, which is shown in the All
Other Compensation column for 2001. Mr. Wycoff's salary for 2002 was at 61% of
the median for Mid-Atlantic banks with assets between $500 million and $5
billion. The Committee ratified the terms of Mr. Wycoff's employment agreement,
extending the term for an additional year.
The Committee grants bonuses to executive officers, including the Chief
Executive Officer, based upon the degree of attainment of specified individual
and Company performance objectives for the year. The Company's performance
objectives include reaching target levels based on earnings of the Company and
the Bank. The bonus objectives for 2001 were based on 50% for Company
performance and 50% for Bank performance, and for 2002 were based on 33.3% for
Company performance and 66.7% for Bank performance. Greater weight was assigned
to the Bank performance in 2002 due to the sale of several subsidiaries of the
Company. The amount of the 2001 bonus was based on the formula in the existing
bonus plan, which provided for a reduced payment due to only partial achievement
of the Bank's objectives in 2001 and no achievement of the Company's goals in
2001. Mr. Wycoff's bonus for 2001 was higher than his bonus for 2000 because he
elected to receive an additional $100,000 bonus in lieu of receiving any stock
12
option grants in 2002, which bonus was deferred by the Committee until the OTS
directive was removed. The bonuses for 2002 performance to executive officers
other than Mr. Wycoff were based on the Bank exceeding its net income budget and
reaching the middle tier of the plan, while the Company's performance did not
reach the minimum threshold for a bonus to be paid.
Because the OTS directive was removed in 2002 and the Company reached a
$70 million market capitalization, Mr. Wycoff was entitled to receive a bonus
equal to 50% of his salary, or $250,000. However, the Committee reduced the
bonus to $225,000 due to budget concerns, and reserved $50,000 of the 2002 bonus
to be paid by September 30, 2003. The Company is considering providing Mr.
Wycoff with a supplemental retirement plan ("SERP") to replace the currently
suspended split dollar plan, and any expense in 2003 for a new SERP will be
deducted from the $50,000 bonus held in reserve.
The Committee also considers the granting of stock options each year.
The Committee considers the Company's performance in terms of total shareholder
return relative to a peer group, the Company's profitability, and the number of
options available for grant. The amount of options granted each year is at the
sole discretion of the Committee. The Executive Vice Presidents and Senior Vice
Presidents generally received fewer stock options in 2002 than they received in
2001 due to the reduced performance of the Company in 2001. The Committee
considered granting Mr. Wycoff stock options for 25,000 shares in 2002, which
was less than he received in 2001. However, because Mr. Wycoff needed to
exercise stock options that were scheduled to expire in 2002 and did not want to
sell any shares of common stock to fund such exercises, the Committee agreed to
pay Mr. Wycoff an additional $100,000 bonus for 2001 in lieu of granting him any
stock options in 2002. Mr. Wycoff exercised stock options for 35,000 shares of
common stock in 2002. The Committee believes that it is important for the
Company's executive officers to have a significant financial stake in the
Company's future so that their interests are aligned with all shareholders.
Paul M. LaNoce
William O. Daggett, Jr.
Kevin J. Silverang
Charles J. Tornetta
William R. Mueller
13
Performance Graph
The following graph compares the yearly cumulative total return on the
Company's common stock over the five year period ending December 31, 2002 with
(i) the yearly cumulative total return on the stocks included in the Nasdaq
Stock Market, Inc. and (ii) the yearly cumulative total return on the stocks
included in the Nasdaq Bank Stocks Index. All of these cumulative returns are
computed assuming the reinvestment of dividends at the frequency with which
dividends were paid during the applicable years.
[GRAPH OMITTED]
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------
Progress Financial Corporation 100.00 83.53 95.02 61.38 65.26 99.35
Nasdaq Stock Market 100.00 140.99 261.48 157.42 124.89 86.33
Nasdaq Bank Stocks 100.00 99.36 95.51 108.95 117.97 120.61
14
Employment Agreements
The Company and the Bank (the "Employers") have entered into an
employment agreement with W. Kirk Wycoff which provides for his employment for a
period of three years with provisions for one-year extensions subject to Board
approval unless sooner terminated by death, disability or termination for cause.
The employment contract provides for a base salary and a bonus plan, and
entitles Mr. Wycoff to participate in all benefit plans and programs available
to executive officers. The employment agreement is terminable with or without
cause by the Employers or Mr. Wycoff. Mr. Wycoff shall have no right to
compensation or other benefits pursuant to the employment agreement for any
period after voluntary termination or termination by the Employers for cause,
disability, retirement or death, provided, however, that if the employment
agreement is terminated by the Employers other than for cause, disability,
retirement or death or by Mr. Wycoff following a change in control of the
Company, as defined, Mr. Wycoff will be entitled to a cash severance amount
equal to 2.99 times the amount of Mr. Wycoff's average annual compensation for
the last five years. The change in control is generally defined in the
employment agreement to mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of the SEC proxy rules,
provided that a change in control shall be deemed to have occurred if (i) any
person acquires beneficial ownership of 25% or more of the Company's outstanding
voting securities, or (ii) during any two-year period a change in a majority of
the directors of the Company occurs without the approval of at least two-thirds
of the persons who were directors of the Company at the beginning of such
period.
The Company has entered into change in control and termination
agreements with certain executive officers of the Company, including Messrs.
Michael B. High and Eric J. Morgan, in order to induce the executives to remain
in the employ of the Company and to assist the Company in maintaining a stable
and competent management base. The agreements are for a five-year term and
provide for payments to the executives upon involuntary termination of the
executive or the occurrence of other specified events related to a reduction in
position, compensation or benefits following a "change in control" of the
Company. Under the agreements, upon a change in control of the Company followed
by termination, the executive would be entitled to the payment of: (i) two times
the executive's highest base salary and annual cash bonus during the last two
years, (ii) life, medical and dental benefits for a period of 24 months
equivalent to benefits they would have received if they remained with the
Company, and (iii) outplacement services for a period of 12 months. The present
value of the total amount of payments under each of the above agreements, when
aggregated with any other payments to the executive which constitute parachute
payments under Section 280G of the Internal Revenue Code of 1986, may not exceed
2.99 times the executive's base amount as determined under Section 280G.
CERTAIN TRANSACTIONS
Indebtedness of Management. The Bank offers certain loans to its
directors, officers and employees. It is the belief of management that these
loans do not involve more than the normal risk of collectibility. Except for the
waiving in most cases of loan origination fees for officers and employees during
their employment or association with the Bank, these loans are made on
substantially the same terms as those prevailing at the time for comparable
transactions with nonaffiliated persons. Executive officers, directors, officers
and employees of the Bank receive no discount from the market interest rate for
loans made by the Bank. As of December 31, 2002, the Company had loans totaling
$3.5 million (or 5.2% of the Company's total stockholders' equity) which were
outstanding to six of the Company's directors and executive officers and their
affiliated parties as a group.
Related Transactions. W. Kirk Wycoff serves as a 6.05% individual
limited partner on behalf of the Company of Progress Capital II, L.P., the 1%
general partner of NewSpring Ventures, L.P., a venture fund that was managed by
Progress Capital Management, Inc. The Small Business Administration requires
that individuals serve as the limited partners of Progress Capital II, L.P.
Progress Capital Management, Inc. manages the Ben Franklin/Progress Capital Fund
L.P. and an unrelated third party manages NewSpring Ventures; the unrelated
third party assumed the management of NewSpring Ventures on January 1, 2002.
15
Progress Bank leases branch office locations from certain partnerships,
the partners of which are family members of Charles J. Tornetta, a director of
the Company. The lease payments are based upon current market values for the
properties and, during 2002, the Bank made aggregate payments of $253,475. In
addition, Tornetta Realty Corporation, of which Mr. Tornetta is President, has
entered into an agreement to sell real estate properties owned by the Bank and
from which Tornetta Realty received $258,664 in commissions during 2002.
Kistler Tiffany Benefits is a broker of record under the Company's
medical benefit plans and derives commission payments from insurance carriers.
William O. Daggett, Jr., a director of the Company, is President of Kistler
Tiffany Benefits.
The law firms of Buchanan Ingersoll, of which Kevin J. Silverang is a
managing shareholder, Pepper, Hamilton LLP, of which A. John May, III is a
partner, and Ballard, Spahr, Andrews & Ingersoll, LLP, of which William L.
Mueller is a partner, provide legal services to the Company and its subsidiaries
from time to time in the ordinary course of business.
PROPOSAL TO AMEND THE 2000 INCENTIVE STOCK OPTION PLAN TO AUTHORIZE THE
ISSUANCE OF AN ADDITIONAL 100,000 SHARES OF COMMON STOCK PURSUANT TO THE PLAN
At the annual meeting, stockholders will be asked to consider and
approve a proposal to amend the 2000 Incentive Stock Option Plan to increase the
number of authorized shares of common stock to be issued under the plan. Such
amendment was unanimously approved by the board of directors of the Company.
Description of the Amendment
The Company maintains the Incentive Plan, which provides for the grant
of stock options and stock appreciation rights to officers and employees of the
Company. The number of shares of common stock currently reserved for issuance
under the Incentive Plan is 200,000, all of which have been granted to date and,
thus, no shares currently remain available for issuance. As a result, the board
of directors recently amended the Incentive Plan to increase the total number of
shares of common stock reserved for issuance upon exercise of awards granted
under the Incentive Plan by 100,000 from 200,000 to 300,000.
Description of the 2000 Incentive Stock Option Plan
The following description of the Incentive Plan is a summary of its
terms and is qualified in its entirety by reference to the Incentive Plan, a
copy of which is available upon written request to the Secretary of the Company.
General. The Incentive Plan is designed to attract and retain qualified
personnel in key positions, provide officers and key employees with a
proprietary interest in the Company and as an incentive to contribute to the
success of the Company and reward key employees for outstanding performance. The
Incentive Plan is also designed to attract and retain qualified directors for
the Company. The Incentive Plan provides for the grant of incentive stock
options intended to comply with the requirements of Section 422 of the Code
("incentive stock options"), non-incentive or compensatory stock options and
stock appreciation rights (collectively "Awards"). Awards are available for
grant to officers, key employees and directors of the Company and any
subsidiaries, except that non-employee directors are eligible to receive only
awards of non-incentive stock options under the plan.
Administration. The Incentive Plan is administered and interpreted by a
committee of the board of directors that is comprised solely of two or more
non-employee directors.
Stock Options. Under the Incentive Plan, the board of directors or the
committee determines which officers, key employees and non-employee directors
will be granted options, whether such options will be incentive or compensatory
options (in the case of options granted to employees), the number of shares
16
subject to each option, the exercise price of each option, whether such options
may be exercised by delivering other shares of common stock and when such
options become exercisable. The per share exercise price of an incentive stock
option shall at least equal to the fair market value of a share of common stock
on the date the option is granted, and the per share exercise price of a
compensatory stock option shall at least equal the greater of par value or the
fair market value of a share of common stock on the date the option is granted.
In granting Awards, the committee may consider the achievement of previously
established objectives or performance goals. Performance goals are based on one
or more of the following criteria: (i) net income, as adjusted for non-recurring
items; (ii) cash earnings; (iii) earnings per share; (iv) cash earnings per
share; (v) return on average equity; (vi) return on average assets; (vii)
assets; (viii) stock price; (ix) total stockholder return; (x) capital; (xi) net
interest income; (xii) market share; (xiii) cost control or efficiency ratio;
and (xiv) asset growth.
All options granted to participants under the Incentive Plan shall
become vested and exercisable at the rate, and subject to such limitations, as
specified by the board of directors or the committee at the time of grant.
Notwithstanding the foregoing, no vesting shall occur on or after a
participant's employment or service with the Company is terminated for any
reason other than his death, disability or retirement. Unless the committee or
board of directors shall specifically state otherwise at the time an option is
granted, all options granted to participants shall become vested and exercisable
in full on the date an optionee terminates his employment or service with the
Company or a subsidiary company because of his death, disability or retirement.
In addition, all stock options will become vested and exercisable in full upon a
change in control of the Company, as defined in the Incentive Plan.
Each stock option or portion thereof shall be exercisable at any time
on or after it vests and is exercisable until the earlier of ten years after its
date of grant or three months after the date on which the employee's employment
terminates (one year after termination of service in the case of non-employee
directors), unless extended by the committee or the board of directors to a
period not to exceed five years from such termination. Unless stated otherwise
at the time an option is granted (i) if an employee terminates his employment
with the Company as a result of disability or retirement without having fully
exercised his options, the optionee shall have one year following his
termination due to disability or retirement to exercise such options, and (ii)
if an optionee terminate his employment or service with the Company following a
change in control of the Company without having fully exercised his options, the
optionee shall have the right to exercise such options during the remainder of
the original ten year term of the option. However, failure to exercise incentive
stock options within three months after the date on which the optionee's
employment terminates may result in adverse tax consequences to the optionee. If
an optionee dies while serving as an employee or a non-employee director or
terminates employment or service as a result of disability or retirement and
dies without having fully exercised his options, the optionee's executors,
administrators, legatees or distributees of his estate shall have the right to
exercise such options during the one year period following his death, provided
no option will be exercisable more than ten years from the date it was granted.
Stock options are non-transferable except by will or the laws of
descent and distribution. Notwithstanding the foregoing, an optionee who holds
non-qualified options may transfer such options to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust for the benefit
or one or more of these individuals. Options so transferred may thereafter be
transferred only to the optionee who originally received the grant or to an
individual or trust to whom the optionee could have initially transferred the
option. Options which are so transferred shall be exercisable by the transferee
according to the same terms and conditions as applied to the optionee.
Payment for shares purchased upon the exercise of options may be made
either in cash, by certified or cashier's check or, if permitted by the
committee or the board, by delivering shares of common stock (including shares
acquired pursuant to the exercise of an option) with a fair market value equal
to the total option price, by withholding some of the shares of common stock
which are being purchased upon exercise of an option, or any combination of the
foregoing.
Stock Appreciation Rights. Under the Incentive Plan, the board of
directors or the committee is authorized to grant rights to optionees ("stock
appreciation rights") under which an optionee may surrender any exercisable
incentive stock option or compensatory stock option or part thereof in return
for payment by the Company to the optionee of cash or common stock in an amount
equal to the excess of the fair market value of the shares of common stock
subject to option at the time over the option price of such shares, or a
combination of cash and common stock. Stock appreciation rights may be granted
concurrently with the stock options to which they relate or at any time
thereafter which is prior to the exercise or expiration of such options.
17
Number of Shares Covered by the Incentive Plan. A total of 300,000
shares of common stock has been reserved for future issuance pursuant to the
Incentive Plan, subject to stockholder approval of the amendment to increase the
number of shares from 200,000 to 300,000. In the event of a stock split, reverse
stock split, subdivision, stock dividend or any other capital adjustment, the
number of shares of common stock under the Incentive Plan, the number of shares
to which any Award relates and the exercise price per share under any option or
stock appreciation right shall be adjusted to reflect such increase or decrease
in the total number of shares of common stock outstanding or such capital
adjustment.
Amendment and Termination of the Incentive Plan. The board of directors
may at any time terminate or amend the Incentive Plan with respect to any shares
of common stock as to which Awards have not been granted, subject to any
required stockholder approval or any stockholder approval which the board may
deem to be advisable. The board of directors may not, without the consent of the
holder of an Award, alter or impair any Award previously granted or awarded
under the Incentive Plan except as specifically authorized by the plan.
Unless sooner terminated, the Incentive Plan shall continue in effect
for a period of ten years from February 1, 2000, the date that the Incentive
Plan was adopted by the board of directors. Termination of the Incentive Plan
shall not affect any previously granted Awards.
Awards to be Granted; Stockholder Approval. The Company has made no
determination as of the date hereof as to the timing or recipients of future
grants of Awards under the Incentive Plan. No Awards will be granted under the
Incentive Plan in excess of the 200,000 shares of common stock originally
authorized under the Incentive Plan unless the amendment to increase the number
of shares by 100,000 is approved by stockholders. Stockholder ratification of
the amendment will satisfy listing requirements of the Nasdaq Stock Market and
federal tax requirements.
Federal Income Tax Consequences. Under current provisions of the Code,
the federal income tax treatment of incentive stock options and compensatory
stock options is different. As regards incentive stock options, an optionee who
meets certain holding period requirements will not recognize income at the time
the option is granted or at the time the option is exercised, and a federal
income tax deduction generally will not be available to the Company any time as
a result of such grant or exercise. With respect to compensatory stock options,
the difference between the fair market value on the date of exercise and the
option exercise price generally will be treated as compensation income upon
exercise, and the Company will be entitled to a deduction in the amount of
income so recognized by the optionee. Upon the exercise of a stock appreciation
right, the holder will realize income for federal income tax purposes equal to
the amount received by him, whether in cash, shares of stock or both, and the
Company will be entitled to a deduction for federal income tax purposes in the
same amount.
Section 162(m) of the Code generally limits the deduction for certain
compensation in excess of $1 million per year paid by a publicly-traded
corporation to its chief executive officer and the four other most highly
compensated executive officers ("covered executive"). Certain types of
compensation, including compensation based on performance goals, are excluded
from the $1 million deduction limitation. In order for compensation to qualify
for this exception: (i) it must be paid solely on account of the attainment of
one or more preestablished, objective performance goals; (ii) the performance
goal must be established by a compensation committee consisting solely of two or
more outside directors, as defined; (iii) the material terms under which the
compensation is to be paid, including performance goals, must be disclosed to
and approved by stockholders in a separate vote prior to payment; and (iv) prior
to payment, the compensation committee must certify that the performance goals
and any other material terms were in fact satisfied (the "certification
requirement").
Treasury regulations provide that compensation attributable to a stock
option or stock appreciation right is deemed to satisfy the requirement that
compensation be paid solely on account of the attainment of one or more
performance goals if: (i) the grant is made by a compensation committee
consisting solely of two or more outside directors, as defined; (ii) the plan
18
under which the option or stock appreciation right is granted states the maximum
number of shares with respect to which options or stock appreciation rights may
be granted during a specified period to any employee; and (iii) under the terms
of the option or stock appreciation right, the amount of compensation the
employee could receive is based solely on an increase in the value of the stock
after the date of grant or award. The certification requirement is not necessary
if these other requirements are satisfied.
The Incentive Plan has been designed to meet the requirements of
Section 162(m) of the Code and, as a result, the Company believes that
compensation attributable to stock options and stock appreciation rights granted
under the Incentive Plan in accordance with the foregoing requirements will be
fully deductible under Section 162(m) of the Code. If the non-excluded
compensation of a covered executive exceeded $1 million, however, compensation
attributable to other awards, such as restricted stock, may not be fully
deductible unless the grant or vesting of the award is contingent on the
attainment of a performance goal determined by a compensation committee meeting
specified requirements and disclosed to and approved by the stockholders of the
Company. The board of directors believes that the likelihood of any impact on
the Company from the deduction limitation contained in Section 162(m) of the
Code is remote at this time.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting Treatment. Stock appreciation rights will, in most cases,
require a charge against the earnings of the Company each year representing
appreciation in the value of such rights over periods in which they become
exercisable. Such charge is based on the difference between the exercise price
specified in the related option and the current market price of the common
stock. In the event of a decline in the market price of the common stock
subsequent to a charge against earnings related to the estimated costs of stock
appreciation rights, a reversal of prior charges is made in the amount of such
decline (but not to exceed aggregate prior charges).
Neither the grant nor the exercise of an incentive stock option or a
non-qualified stock option under the Incentive Plan currently requires any
charge against earnings under generally accepted accounting principles.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," establishes financial accounting and reporting standards for
stock-based employee compensation plans. This statement defines a fair value
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the fair value method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value method,
compensation cost is the excess, if any, of the quoted market price of the stock
at grant date or other measurement date over the amount an employee must pay to
acquire the stock. The Company anticipates that it will use the intrinsic value
method, in which event pro forma disclosure will be included in the footnotes to
the Company's financial statements to show what net income and earnings per
share would have been if the fair value method had been utilized. If the Company
elects to utilize the fair value method, its net income and earnings per share
will be adversely affected.
The Board of Directors unanimously recommends that stockholders vote
FOR approval of the amendment to the 2000 Incentive Stock Option Plan to
authorize the issuance of 100,000 additional shares of common stock pursuant to
the plan.
19
PROPOSAL TO RATIFY APPOINTMENT OF THE INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed
PricewaterhouseCoopers LLP, independent accountants, to perform the audit of the
Company's financial statements for the year ending December 31, 2003, and
further directed that the selection of auditors be submitted for ratification by
the stockholders at the Annual Meeting.
The Company has been advised by PricewaterhouseCoopers LLP that neither
that firm nor any of its associates has any relationship with the Company other
than the usual relationship that exists between independent certified public
accountants and clients. PricewaterhouseCoopers LLP will have one or more
representatives at the Annual Meeting who will have an opportunity to make a
statement, if they so desire, and will be available to respond to appropriate
questions.
Audit Fees
The aggregate amount of the fees billed by PricewaterhouseCoopers LLP
for its audit of the Company's annual financial statements for 2002 and its
reviews of the Company's unaudited interim financial statements included in
reports filed by the Company under the Exchange Act during the year was
$118,000.
Financial Information Systems Design and Implementation
PricewaterhouseCoopers LLP did not provide any services to the Company
for financial information systems design and implementation during 2002.
All Other Fees
The aggregate amount of the fees billed by PricewaterhouseCoopers LLP
for all other services rendered by it to the Company during 2002 was $195,540.
These services consisted primarily of internal audit services, a review of a
registration statement filed by the Company with the Securities and Exchange
Commission and a review of certain internal controls.
The board of directors and its Audit Committee considered the
compatibility of the non-audit services provided to the Company by
PricewaterhouseCoopers LLP in 2002 on the independence of PricewaterhouseCoopers
LLP from the Company in evaluating whether to appoint PricewaterhouseCoopers LLP
to perform the audit of the Company's financial statements for the year ending
December 31, 2003. Effective January 1, 2003, PricewaterhouseCoopers LLP will no
longer perform internal audit services for the Company in order to separate the
internal and independent audit functions due to new federal legislation and
regulations.
The Board of Directors recommends that you vote FOR the ratification of
the appointment of PricewaterhouseCoopers LLP as independent auditors for the
year ending December 31, 2003.
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is scheduled to be held in April 2004, must be received at
the principal executive offices of the Company, 4 Sentry Parkway, Suite 200,
P.O. Box 3036, Blue Bell, Pennsylvania 19422-0764, Attention: Eric J. Morgan,
Corporate Secretary, no later than November 26, 2003. If such proposal is in
compliance with all of the requirements of Rule 14a-8 under the Exchange Act, it
will be included in the proxy statement and set forth on the form of proxy
issued for such annual meeting of stockholders. It is urged that any such
proposals be sent certified mail, return receipt requested.
20
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the Exchange Act may be
brought before an annual meeting pursuant to Section 8.9 of the Company's
certificate of incorporation, which provides that business at an annual meeting
of stockholders must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors, or
(b) otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Company. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Company not less than 30
days prior to the annual meeting. A stockholder's notice must set forth as to
each matter the stockholder proposes to bring before an annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and address, as they appear on the Company's books, of the stockholder
proposing such business and any other stockholders known by the stockholder to
be supporting such proposal, (c) the class and number of shares of common stock
of the Company which are beneficially owned by the stockholder, and by any other
stockholders known by the stockholder to be supporting such proposal and (d) any
financial interest of the stockholder in such business.
ANNUAL REPORTS
A copy of the Company's annual report on Form 10-K for the year ended
December 31, 2002 accompanies this proxy statement. Such annual report is not
part of the proxy solicitation materials.
OTHER MATTERS
Management is not aware of any business to come before the annual
meeting other than the matters described above in this proxy statement. However,
if any other matters should properly come before the meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by the Company.
The Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending the proxy
materials to the beneficial owners of the Company's common stock. In addition to
solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
21
REVOCABLE PROXY
PROGRESS FINANCIAL CORPORATION
4 SENTRY PARKWAY, SUITE 230
P.O. BOX 3036
BLUE BELL, PA 19422-0764
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF PROGRESS FINANCIAL
CORPORATION FOR USE ONLY AT AN ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD
APRIL 22, 2003 AND AT ANY ADJOURNMENTS THEREOF.
The undersigned, being a stockholder of Progress Financial Corporation (the
"Company), hereby appoints Eric J. Morgan as proxy, with full power of
substitution, to represent and vote as designated below all of the shares of
Common Stock of the Company which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at Plymouth Country
Club, located at Plymouth and Belvoir Roads, Norristown, Pennsylvania on
Tuesday, April 22, 2003 at 9:00 a.m., Eastern Time and at any adjournment
thereof.
This Proxy is solicited by the Board of Directors of the Company. The shares
of Common Stock will be voted as specified. If not otherwise specified, this
Proxy will be voted FOR the election of the Board of Director's nominees for
director, FOR the proposal to amend the 2000 Incentive Stock Option Plan, FOR
the proposal to ratify the independent accountants, and otherwise at the
discretion of the Proxy. You may revoke this Proxy at any time prior to the time
it is voted at the Annual Meeting.
(Continued and to be signed on the reverse side)
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SEE REVERSE
SIDE
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14475
ANNUAL MEETING OF SHAREHOLDERS OF
PROGRESS FINANCIAL CORPORATION
April 22, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach and mail in the envelope provided.
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
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FOR AGAINST ABSTAIN
1. To elect three Directors for a three year term expiring
in 2006, and one Director for a one year term expiring in 2. PROPOSAL to amend the 2000 [ ] [ ] [ ]
2004. Directors recommend a vote "FOR." Incentive Stock Option Plan
NOMINEES: to authorize the issuance of
[ ] FOR ALL NOMINEES O A. John May III for a three year term, 2006 an additional 100,000 shares
O Charles J. Tornetta for a three year term, 2006 of Common Stock pursuant to
[ ] WITHHOLD AUTHORITY O W. Kirk Wycoff for a three year term, 2006 the Plan. Directors recommend
FOR ALL NOMINEES O Frank A. Farnesi for a one year term, 2004 a vote "FOR."
[ ] FOR ALL EXCEPT 3. PROPOSAL to ratify the appointment [ ] [ ] [ ]
(See instructions of Pricewaterhouse Coopers LLP as
below) for the year ending December 31, 2003.
Directors recommend a vote "FOR."
4. In their discretion, the proxies are authorize to vote
upon such other business as may properly come before
the meeting.
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark "FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: o
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To change the address on your account, please check the box at [ ]
right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the account
may not be submitted via this method.
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Signature of Shareholder ________________________________________ Date: ____________________
Signature of Shareholder ________________________________________ Date: ____________________
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.